Chapter 8: Wages

The Price of Labor-power. Essential Nature of Wages

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“Wages are not what they appear to be, namely the value, or price, of labor, but only a masked form for the value, or price, of labor-power.”[1]

Wages are the monetary expression of the value of labor-power, its price, outwardly appearing as the price of labor.

“Under slavery no buying and selling of labor-power takes place between slave-owner and slave. The slave is the property of the slave-owner. It therefore seems as though the whole of the slave’s labor is given for nothing, that even that part of his labor which replaces what has been spent on his upkeep is unpaid labor, labor for the slave-owner. In feudal society the necessary labor of the peasant on his own holding and his surplus labor on the landlord’s demesne are distinctly separated in time and space. Under the capitalist system even the unpaid labor of the wage-worker appears to be paid for.”

Wages conceal all traces of the division of the working day into necessary and surplus labor-time, into paid and unpaid labor, and so cover up the relation of capitalist exploitation.

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Nominal and Real Wages

In the early stage of capitalism’s development, payment of wages to the workers in kind was widespread: the worker received shelter, some meagre food and a little money.

“Wages in kind survive to some extent even into the machine period of capitalism. They existed, for instance in the extractive and textile industries of pre-revolutionary Russia. Wages in kind are widespread in capitalist agriculture where the labor of poor peasants is used, in certain branches of industry in the capitalist countries, and in the colonial and dependent countries. The forms in which the worker is paid in kind vary. The capitalists place the workers in a position where they are forced to take food on credit from the factory shop, to lease a dwelling near the mine or on the plantation on oppressive terms fixed by their employer, etc. Under methods of wage-payment in kind the capitalist exploits the wageworker not only as a seller of labor-power but also as a consumer.”

Money wages are characteristic of the capitalist mode of production in its developed form.

Nominal wages must be distinguished from real wages.

Nominal wages are wages expressed in money; the sum of money which the worker receives from the sale of his labor-power to the capitalist.

Nominal wages do not in themselves give any idea of the actual level of payment received by the worker. For example, nominal wages may remain unchanged, but if at the same time taxes and the prices of consumer goods rise, the worker’s actual wages fall. Nominal wages may even increase, but if the cost of living rises to a greater extent in the same period of time, then in fact wages have fallen.

Real wages are wages expressed in terms of the worker’s means of subsistence; they show how many and what kinds of consumer goods and services a worker can buy with his money wages. To determine a worker’s real wage, one must start the size of his nominal wages, the level of prices of goods, the level of rents, the burden of taxes borne by the workers, the circumstances that some days he may receive no wages owing to short-time working, and the number of unemployed and semi-unemployed who are supported by the working class. One must also take into account the length the working day and the degree of intensity of labor.

In determining the average level of wages, bourgeois statistics distort reality: they include in wages the incomes of the upper administrative groups of the industrial and financial bureaucracy (managers of enterprises, bank directors, etc.); include only the wages of skilled workers in the category of wages while excluding from it the numerous stratum of poorly-paid, unskilled workers and the agricultural proletariat; ignore the huge army of unemployed and semi-unemployed, the rise in the prices of mass consumer goods and in taxation; and resort to other methods of falsification so as to embellish the situation of the working class under capitalism.

Even falsified bourgeois statistics cannot, however, hide the fact that wages under capitalism, owing to their low level, the raising of the cost of living and the growth of unemployment fail to guarantee a living wage to the majority of the workers.

“In 1938 some bourgeois economists in the U.S.A. worked out, using extremely modest standards, a living wage for a worker’s family consisting of four persons: 2,177 dollars a year. Yet in 1938 the average wage per head of an industrial worker in the U.S.A. amounted to 1,176 dollars, i.e., considerably less than half of his living wage; if the unemployed were brought into the calculation, the figure came to 740 dollars, i.e., only a third of this subsistence minimum. In 1937 a quite humble living wage for an average worker’s family in Britain was defined by some bourgeois economists at 55s a week. Official figures showed that 80 percent of the workers in the coal industry, 75 percent of the workers in the extractive industries other than coal mining, and 57 percent of municipal workers in Britain were being paid less than this subsistence minimum.”

Decline of Real Wages under Capitalism

On the basis of his analysis of the capitalist mode of production, Marx established the following fundamental law relating to wages. “The general tendency of capitalist production is not to raise but to sink the average standard of wages.”[2]

Wages as the price of labor-power, like the price of any other commodity, are determined by the law of value. The prices of commodities vary in capitalist economy both above and below their value, under the influence of supply and demand. But unlike the prices of other commodities the price of labor-power, as a rule, tends to fall below its value.

This tendency of wages to fall below the value of labor-power is due above all to the existence of unemployment. The capitalist tries to buy labor-power as cheap as he can. When there is unemployment the supply of labor-power exceeds the demand for it. The commodity labor-power differs from others in that the proletarian cannot put off selling it. So as not to die of hunger, he is compelled to sell his labor-power on whatever terms the capitalist offers him. In periods of complete, or partial unemployment the worker is either entirely without wages or else their level falls sharply. When there is unemployment, this intensifies competition among the workers. Taking advantage of this, the capitalist pays the worker wages which are less than the value of his labor-power. In this way the wretched situation of the unemployed; who form part of the working class, has an effect on the material position of the workers in employment, reducing the level of their wages.

Furthermore, the use of machinery provides the capitalist with extensive opportunities of substituting female and child labor for men’s labor. The value of labor-power is determined by the value of the means of subsistence which are needed by a worker and his family. When, therefore, the worker’s wife and children are drawn into production, the worker’s wages fall and the entire family now receives approximately the same amount as previously was received by the head of the family only. This by itself means that the working class as a whole is being exploited still more intensely. In capitalist countries women workers doing the same work as men are paid considerably less wages.

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The Struggle of the Working Class to Raise Wages

In each country a certain level of wages is established on the basis of the law of the value of labor-power, as a result of a fierce class struggle between the proletariat and the bourgeoisie.

The extent to which wages can diverge from the value of labor-power has its limits.

The minimum limit of wages under capitalism is fixed by purely physical conditions: the worker must have that quantity of means of subsistence which he needs absolutely in order to live and reproduce his labor-power. “If the price of labor-power falls to this minimum it falls below its value since under such circumstances, it can be maintained and developed only in a crippled state.”[3] When wages fall below this limit, there occurs an accelerated process of direct physical destruction of labor-power and dying-off of the working population. This finds expression in a shortening of the average expectation of life, a fall in the birth rate and an increase in the mortality rate among the working population, both in the developed countries and also and especially, in the colonial countries.

The maximum limit of wages under capitalism is the value of labor-power. The degree to which the average level of wages approximates to this limit is determined by the relation of class forces as between proletariat and bourgeoisie.

The bourgeoisie endeavors, in its striving for greater profits, to reduce wages below the physical minimum limit. The working class fights against cuts in wages and for increased wages, for the establishment of a guaranteed minimum wage, for the introduction of social insurance, and for a shorter working day. In this struggle the working class is opposed by the capitalist class as a whole and by the bourgeois State.

The stubborn struggle waged by the working class to raise wages had its beginning along with the rise of industrial capitalism. It developed first in Britain, and later spread to the other capitalist countries and to the colonies.

As the proletariat takes shape as a class the workers come together in trade unions for the purpose of successfully conducting their economic struggle. The result of this is that the employer finds himself opposed no longer by individual proletarians but by an entire organization. With the development of the class struggle, besides local and national trade unions there came into being international associations of trade Unions. The trade unions provide a school of class struggle for the broad masses of the workers.

On their part, the capitalists come together in employers’ associations. They bribe venal and reactionary trade union officials, organize strike-breaking, split the workers’ organizations, and use the police, troops, courts and prisons to suppress the labor movement.

One of the effective methods of struggle used by the workers under capitalism to secure increased wages, shorter working hours and improved conditions of work is the strike. As class contradictions become more acute and the working-class movement becomes better organized in the capitalist and colonial countries, many millions of workers are drawn into strike struggles. When workers struggling against capital show determination and stubbornness, economic strikes force the capitalists to accept the strikers’ terms.

It is only as a result of the unremitting struggle of the working class for its vital interests that the bourgeois States are compelled to promulgate laws on minimum wages, on reduction of working hours and on restriction of child labor.

The economic struggle of the proletariat is of great importance: as a rule, trade unions under steadfast class leadership put up a successful resistance to the employers. The struggle of the working class is a factor which to a certain extent restrict the fall in wages. But the economic struggle of the working class cannot abolish the system of capitalist enslavement of the working people and deliver the workers from exploitation and want.

While recognizing the great importance of the economic struggle of the working class against the bourgeoisie, Marxism-Leninism teaches that this struggle is directed merely against the consequences of capitalism and not against the root cause of the oppressed situation and poverty of the proletariat. This root cause is the capitalist mode of production itself.

Only through revolutionary political struggle can the working class abolish the system of wage slavery, the source of its economic and political oppression.

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[1] Marx, “Critique of the Gotha Programme”, Marx and Engels, Selected Works, Vol. II, p. 27.

[2] Marx, “Wages, Price and Profit”, Marx and Engels, Selected Works, Vol. I, p. 405.

[3] Marx, Capital, Kerr edition, Vol. I, p. 192.